It is one of the more revealing questions to put to a director. Almost nobody has the figure to hand, and the guesses tend to land somewhere around what they are already paying. If you pay in £500 a month, your instinct says the ceiling is somewhere near £6,000, because that is the only number in view.

The real ceiling for most established limited companies is nowhere near that. The gap between what a director assumes and what the rules actually permit is usually the single largest unused planning position in the business, and it is invisible because nothing on a bank statement or a set of accounts points at it.

Here is what that gap costs. Profit stays in the company, corporation tax is paid on it, and what is left becomes retained earnings waiting for a dividend decision that may never come in a tax-efficient form. The money is yours in principle and doing very little for you in practice.

A company pension contribution is one of the few routes that moves money from the company into your own long-term position without going through salary or dividends. It is an allowable business expense where it passes HMRC’s test that the payment is for the purposes of the trade. None of that is exotic. It is simply a route that goes unused when nobody puts it on the agenda.

For the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, the annual allowance is £60,000. That figure covers everything going into your pensions in the year: your own contributions, anything the company pays, and any employer scheme you are enrolled in.

Two things narrow it. If your threshold income is over £200,000 and your adjusted income is over £260,000 for 2026/27, the allowance tapers down, to a floor of £10,000. And if you have already flexibly accessed a defined contribution pot, the money purchase annual allowance of £10,000 for 2026/27 applies instead. For most owner-directors we work with, neither bites. The £60,000 is the starting point, not the ceiling.

In practice, the typical set-up looks like this. A personal pension was opened years ago, often before the company existed or in the first year of trading. A modest direct debit leaves the director’s own current account each month. Nothing has been reviewed since.

It is an entirely reasonable arrangement for someone drawing a normal salary. It is the wrong arrangement for a director paying themselves a small salary and taking the rest as dividends, which is the structure most of our consultant and contractor clients run. The payment route was chosen when the circumstances were different, and nobody revisited it when the circumstances changed.

Tax relief on your own contributions is limited to the higher of your UK taxable earnings or £3,600. Dividends are not earnings for this purpose. So if you are on a salary of £12,570 for 2026/27 and the rest of your income arrives as dividends, your personally relievable contribution tops out around that salary figure.

A company contribution works differently. It is not capped by the salary you take. It sits against the same £60,000 annual allowance and has to pass the test that it is a genuine cost of the trade, which for a working director drawing a modest salary is rarely the obstacle people expect. Same pension, same pot, a far larger limit.

Take the pattern we see most often. An IT or engineering contractor, trading through their own limited company, salary set low and the balance drawn as dividends. Three solid years of profit behind them. A pension opened at some point in the past that they check roughly never.

Nothing here is unusual and nothing here is wrong. The structure is doing its job on income tax and National Insurance. What it is not doing is making any use of the one route that lets retained profit move into a pension without passing through the director’s personal income at all.

When we looked at the detail, the company had never paid a penny into the pension. Every contribution over several profitable years had come out of the director’s own account, after the money had already been taxed on its way to him.

Two consequences follow. The company got no deduction against its profits for any of it, because it was never a company cost. And the amount going in was quietly governed by a salary chosen for payroll reasons, which had nothing to do with what he could have afforded or what the rules allowed. He had been paying for his pension in the most restricted way available to him, for years, without knowing there was another route.

The question worth asking is why nobody caught it. His previous accountants were competent at what they did. Books came in, accounts went out, the corporation tax figure arrived with the filing and the invoice followed. At no point in three years did anyone sit down with him before a year end and ask what he wanted to do with the profit.

This is the part of the industry we are blunt about. Compliance delivered on time is not advice. If the only conversation you have with your accountant happens after the year has closed, every decision that needed deciding during the year has already been made by default.

The cost of that silence is measurable. HMRC allows unused annual allowance to be carried forward from the previous three tax years and added to the current year’s allowance, provided you were a member of a UK registered pension scheme in those years. For a director who has used almost none of it, that is a substantial amount of headroom sitting behind them.

The catch is that the window only reaches back three years. Each 5 April, the oldest year drops off and does not come back. Our view is that the practical work of using carry forward, checking profit, confirming scheme membership and getting the payment made and cleared, needs time, so the review has to happen well inside the tax year rather than at the end of it.

The fix was not complicated. We stopped the personal direct debit and moved the contribution to the company, so it became a cost of the business rather than something paid out of taxed personal income.

The order matters. First the profit, because the contribution has to be affordable and has to stand up as a genuine business cost. Then the three previous tax years, to establish what carry forward was actually available rather than assumed. Then the paperwork: board minute, correct payment from the company account, and the scheme told to treat it as an employer contribution. Each step is ordinary. Doing them in sequence, with months rather than days to spare, is the whole trick.

What changed for him permanently is that the pension figure now turns up at the same time as everything else. It sits in the same review as the corporation tax forecast and the dividend headroom, well before the tax year closes, because those three numbers are the same decision viewed from three angles.

You cannot sensibly decide what to pay into a pension without knowing the profit position, and you cannot sensibly plan dividends without knowing what the pension contribution will take out. Looked at together, with time to act, it is a straightforward allocation. Looked at one at a time in March, it is a scramble.

So the position we hold is this. A pension decision made in the last weeks of the tax year is mostly guesswork, because the profit figure is provisional, the carry forward position has not been checked properly and there is no room left to get the payment made and cleared in time.

If you are a limited company director and you do not know what your allowance is this year, that is the question to put to whoever does your accounts. Not in March. Now, while the year still has shape in it and the answer can still change what you do.